A question which we are asked quite frequently is what VAT are we allowed to claim on mileage expenses, when employees are claiming the HMRC mileage allowance?


The good news, and the straight forward answer, is that yes you can claim back VAT on your mileage allowance (if you are a VAT registered business). However, it is not the simple standard or reduced rate which is allowed.

Currently, the approved mileage allowance rates are as follows;

Type of vehicle First 10,000 miles Above 10,000 miles
Cars and vans 45p 25p
Motorcycles 24p 24p
Bikes 20p 20p


The rates are set to reimburse employees not only for the cost of petrol, but also the running costs and any wear and tear. (The reason the rate drops at 10,000 miles is because HMRC say at this point your employees have received enough towards the running costs, in compensation for using their car for business purposes).

When claiming back the VAT, HMRC stipulate that you can claim only from the petrol element of this allowance. The tricky part comes in working out what the petrol element is!

HMRC do provide advisory fuel rates for this purpose. For a list of these rates please see the HMRC website,  As an example, at the time of writing this blog, the advisory fuel rate for a petrol vehicle (engine size 1401cc to 2000cc) is 14p. VAT can be reclaimed on this 14p at the standard rate (which is currently 20%).

The only caveat that HMRC have, is that you must keep enough of your fuel receipts to cover the amount of your VAT claim.

The really tricky bit however, is that the advisory fuel rates (element you can claim for fuel), change every quarter, meaning your VAT claim will also be slightly different.

Fortunately, there is an easier way to handle these mileage claims. Using our HMRC Rate Update Service, we will ensure that you are claiming the correct amount of VAT, and take away the worry of manual calculations.